SPEAKER_01 0:10

It's all doom and gloom. Well, hopefully it's not. Today we're going to talk about economics and the state of the world. And I've got James with me. He's I made him a resident economics teacher.

SPEAKER_00 0:20

So I did teach economics to degree students at one at one point.

SPEAKER_01 0:24

I know. That's why you are a resident economist. So, James, what do you think? Oh gosh, where are we heading?

SPEAKER_00 0:29

It's very hard to keep up with what's going on. I th I think what we need to do is like we need to look historically and go, these sorts of events do happen reasonably often. Like if you think of the beginning of COVID when the Ukraine war broke out, you know, that was a m had a major impact on the world at that time. And this potentially is like that, or even it could be worse, but we're in it at the moment, so it seems really terrible. All I can say is that we need to look towards a long, medium to long-term picture. Like these things don't tend to go on forever. I don't know what the Don is gonna do each day. He's a I have to be careful. I don't want to put the boot into him because he'll probably track me down and you know he'll find you.

Zooming Out With Economic History

New Zealand As A Safe Haven

SPEAKER_01 1:19

He'll find you. But the thing is, right, with the economy, and as you say, if we look actually in the past and what happened in the past, if we take World War II, there was a big recession, right? But then there was a big boom. And I was saying to Kunch yesterday offline, as to be honest, I think the New Zealand property prices will probably go up shortly. Because remember the COVID times, everyone saw New Zealand as a safe haven. And I feel part of me that New Zealand is seen again as a safe haven because Australia is too big. You can't really hide in Australia, right? And if there was a World War III to break out, God forbid, Australia is a big country and it's a big country to go to war with. Versus New Zealand, I don't think anyone ever sees New Zealand as a serious country to attack or to do anything with. So I believe we are sitting here in a very safe place, God's heaven.

Net Migration And Returning Kiwis

SPEAKER_00 2:25

It's always been a gro a be a great place to even if you've lived overseas, uh as a as a New Zealander lived overseas, a lot of people come back to raise a family. You know, so we have been losing a lot of people to Australia. But they're coming back. They are coming back, and then the thing is that's really about the economics of it. That they've actually gone through the last few years reasonably unscathed, whereas we've had a had quite a big pullback just through different approaches, I suppose. So those people will come back, I think. And the the the main one of the big factors I I feel that um impacts property prices is net migration, obviously. So net migration usually I think the average historically is about 30,000 per year. So that got as low as this is net migration. So that takes into account all the people coming and all the people leaving. So that got down to about 10,000, I think, about a year ago, six months to a year ago. But I believe it's slowly coming back up again now.

SPEAKER_01 3:30

I think it is, especially like I was talking to someone this morning and it was saying the friends came from America and they're trying to scoop out what works they can do here, what visas they can apply for. So I know a lot of Americans are not feeling happy, and they will be trying to find an escape route. There's a lot of Australians that are not feeling happy, and they're all coming to New Zealand. Yeah. So I see this as an amazing opportunity for New Zealand to suddenly have a boost in technology and employment and all these new companies and firms coming out. Because when people come from overseas, they're bringing their ideas, they're bringing their experience. And we will be very fortunate to have all that talent coming. Because it's not, let's face it, and I don't want to be mean about it, but poor people don't have the means to escape. Yeah. Right? The people that will be escaping those countries, the people that have talents, opportunities, and money. They're the people that will be running businesses in their countries and looking to set up businesses in New Zealand. So hopefully that will create a bit more opportunities and boost.

How Migrants Lift Business Drive

SPEAKER_00 4:32

And that's what we need, eh? Like if you look to Australia and you can see over there, and a lot of in charge of their big companies, their CEOs, are often immigrants. They came over here as young people and now they're driving these huge companies forward. And that's we need those kind of people coming to New Zealand. Yeah. Just to I don't know, they just bring a a different level of work ethic as well, which you don't always see here because we're used to sort of working a certain way and to you know a certain amount of hours.

SPEAKER_01 5:05

Um Kiwi, you can talk, James.

SPEAKER_00 5:08

New people, new people that come here, and we see it when with new houses, uh, first home buyers, right? The internationals that come here are so motivated, they will do anything to get a house.

SPEAKER_01 5:18

Yeah, they're driven, right? They will save money, they will not take any debts, they will drive a rundown car, they're not gonna upgrade to flesh and sparkly toys because they can't afford their goal is to set the roots to buy a house, and that's what we're here for. We're here to provide an opportunity for them. So um, that's awesome. It'll be really interesting to see. We had a presentation at our conference by Brett. Both of us went blank.

SPEAKER_00 5:46

Oh no, it was no home. Nick Tuffley. That's the one. Nick Tuffley.

SPEAKER_01 5:51

I wouldn't say Brett Olson, but it's the other thing.

SPEAKER_00 5:53

Yeah, Brad Olson from Matrix.

SPEAKER_01 5:54

I think Nick Tufley from ASB.

SPEAKER_00 5:56

That's right, yeah.

SPEAKER_01 5:57

Yeah, it was really interesting because he was sort of like, yeah, it's good, but it's it's sort of it was a very dry sense of humor sometimes.

Iran Risk Inflation And The OCR

SPEAKER_00 6:05

But yeah, that's the problem with this question, right? It's like, gosh, I don't we don't know. It really depends on how long this thing that's going on in Iran lasts for. Yeah. Um if it becomes if it's a short, if it becomes a short thing, then things could go back to normal reasonably quickly. But if it draws out over a long period of time, it's going to be really inflationary. And that's that's when it's going to be an issue from an economics point of view, because if it does become inflationary, then Reserve Bank will have to put up the OCR sooner than we thought.

SPEAKER_01 6:40

Um But did you see the rate's gone down today by ASB? Oh, is it? The six months rate gone down to 4.5, that's right. And 18 months rate gone down as well, and it's a three-year rate. Yeah. So they dropped the six months, eighteen months, and this three-year rate.

SPEAKER_00 6:54

Okay, no, I didn't see that. Just this morning. That's interesting because we saw that big move up in December, right? We were like, where did that come from? That was such a surprise. Nobody saw that coming. Yeah. And then now they're moving them back down again. So we do feel we do follow what these banks are doing, but sometimes it's really hard to read.

Fixing Strategies For Uncertain Rates

SPEAKER_01 7:14

There's no rhyme or reason. No. So But the conversations I've been have having with clients is that hey, look, if you're not doing anything drastic in the next um six to twelve months, go and fix for longer. Yeah, break down your loan, fix it for two years, three years, because we don't know what's going to happen. And having 4.99 for three years, it's an amazing rate.

Wellington Buyers Market And New Builds

SPEAKER_00 7:35

Yeah. Just do it. And and to add to that, the other thing I would say, if you're living in like we're, you know, the welling we're a Wellington franchise. If you're living in the Wellington company area, then and you've got a a job and so forth, it's probably a really good time to be, you know, it's such a buyer's market because you're getting property prices, you know, 25% off their peaks, which is quite, you know, it's quite affordable nowadays. So there's that, and you've got uh there is indications that the economy is picking up. You know, I know people in construction, you know, they are getting a lot more construction leads and uh people actually signing the the agreements and stuff like that. Like I've got two or three more lending applications for for builds.

What We Watch Next

SPEAKER_01 8:20

Yeah, I I've got several as well. People excited, they want to build, they want to leave in nicer houses. Yep. And it's sometimes it's seen it's much better to have a brand new house versus trying to fix the old one consistently. So um yeah, so we're definitely seeing the uptick on that. And um yeah, so let's see what the future brings. Yeah. Thanks for having you, James.

SPEAKER_00 8:39

No problem or bye.